The competing role of natural gas and oil as fossil fuel and the non-linear dynamics of resource curse in Russia

Abstract The aim of this research is to address two emerging and relevant issues that have not been thoroughly investigated in the context of the Russian Federation. The first one is the increasing importance of natural gas and its competing role with Oil as a fossil fuel which should have a significant impact on the overall growth of the Russian Economy. The second issue is an asymmetric effect of natural resource utilization and rents earned on the economic growth which may result in the incorrect interpretation of either resource curse or resource blessings if not properly captured and identified. For this study time-series data from 1988 to 2019 was analyzed using nonlinear autoregressive distributed lag model (NARDL) model. The main findings of this research are surprisingly interesting and confirm the existence of a resource curse for Russia triggered by the positive shocks of natural gas rents. However, the shocks in oil rents which are broadly recognized as the main causes of resource course, tend to be a blessing, because both positive and negative have a positive effect on GDP growth. These findings have important policy consequences for the Russian economy, including how to limit natural gas supply in the face of high global demand and rising prices.